1. Nature of Operations
 
 Strontium Ferriten India Limited (SFIL) is a manufacturer of hard, soft
 ferrites and magnets. SFIL has been producing high quality materials in
 standard and non-standard core sizes and geometries.
 
 2. Statement on Significant Accounting Policies
 
 a) Basis of Preparation & Accounting Assumption
 
 The financial statements have been prepared to comply in all material
 respects with the mandatory Accounting Standards issued by the
 Institute of Chartered Accountants of India and the relevant provisions
 of the Companies Act, 1956. The accounts of the company have been
 prepared under the historical cost convention on an accrual basis. The
 accounts of the company have been pre-pared on a going concern
 assumption.
 
 b) Changes in Accounting Policies
 
 Previously Sales have been accounted exclusive of Excise Duty. Sales
 have been accounted inclusive of Excise Duty for the current year. This
 has been made to confirm to the guidelines issued by the Institute of
 Chartered Accountants of India and is the general corporate practice.
 
 d) Fixed Assets
 
 Fixed Assets are accounted at cost of acquisition exclusive of CENVAT
 and inclusive of freight inward, taxes, incidentals related to
 acquisition and financial costs until commencement of commercial
 production.
 
 e) Depreciation and Amortisation
 
 i) Depreciation on original cost of fixed assets is provided on
 Straight Line Method except tor vehicles, on which depreciation is
 provided on Written Down Value Method at rates prescribed in Schedule
 XIV of the Companies Act, 1956. Depreciation on assets whose actual
 cost did not exceed five thousand rupees, has been provided at the rate
 of hundred percent.
 
 II) Preliminary Expenses are being amortized in tan equal installments
 over a period of ten years commencing from 1998-99 and ending in
 2007-2008.
 
 f) Inventories
 
 I) Raw Materials, Consumable Stores and Spares : At Cost
 
 ii) Work In Process : At Estimated Cost (cost of raw materials and
 other variable cost)
 
 iii) Finished Goods : At lower of cost or net realizable value
 
 g) Purchases & Sates
 
 i) Cost of Raw Materials and other inputs have been recorded exclusive
 of CENVAT credit receivable.
 
 il) Sales have been stated inclusive of Excise Duty but exclusive of
 Sales Tax.
 
 h) Retirement & Other benefits to employees
 
 Provident Fund Contribution in respect of eligible employees is
 provided tor and funded. Gratuity, for eligible employees has been
 provided on cash basis. The Company provides tor Leave Encashment as
 per rules.
 
 i) Taxes on Income
 
 As per the Accounting Standard 22, issued by the Institute of Chartered
 Accountants of India, the tax effect on the differences between
 taxable income and accounting income for a period that originate in one
 period and are capable of reversal on one or more subsequent periods
 are to be recognized and disclosed in the Financial Statements.
 Accordingly the Deferred Tax Assets and Liabilities for the year under
 review have been recognized.
 
 3. Term Loan from Andhra Pradesh State Financial Corporation is secured
 by way of mortgage of all immovable properties both present and future
 and hypothecation of all movable assets along with personal
 guarantees of Director Mr.K.Ranganathan and Managing Director
 Mr.K.Srinivas.
 
 4. Unsecured Loan/Sales Tax Deferment
 
 (a) Interest free Sales Tax Loan of Rs.371,867 (Rs.357,634/- previous
 year) received from Government of Andhra Pradesh is repayable at the
 end of 14 years.
 
 (b) Unsecured Loan of Rs.10,38,571/- constitutes sales tax deferred
 liability. (Prv. year Rs.666,704/-) (Incentive granted by Govt. of
 A.P.)
 
 5. Balances of Sundry Debtors/Creditors and other loans and advances
 given and taken, require confirmation.
 
 6. Outstanding exceeding Rs.1 lac, due for payment for more than 30
 days to any small-scale undertaking - Nil.